Market Talk - Currency: Another shot fired in the global currency war
Jason Walls and CMC's Sheldon Slabbert discuss the global currency market news on NBR Radio and on demand on MyNBR Radio.
Jason Walls and CMC's Sheldon Slabbert discuss the global currency market news on NBR Radio and on demand on MyNBR Radio.
To build your own NBR Radio playlist and enjoy instant on-demand access to any audio, sign up for our FREE smartphone-only subscription to NBR ONLINE
China’s currency devaluation is just the most recent shot in a global currency war that is “a race to the bottom.”
This comes after Chinese authorities devalued the yuan by adding more supply into the market.
NBR reporter Jason Walls says this move took a lot of analysts by surprise.
He says after the multiple interest rate cuts, tax cuts and reductions of banks’ reserve ratio requirement (RRR), the expectation was that more stimulus was to be added the same way.
“China’s slowing economy triggered the authorities to supply the market with more yuan, forcing the value of the currency down.”
CMC Markets trader Sheldon Slabbert says China’s currency devaluation will most likely trigger other economies to devalue their currencies.
He says Japan just released negative GDP figures and this will probably lead to them devaluing the yen further.
Mr Slabbert adds that this will be followed by South Korea, then potentially Australia.
“This will continue until there is a system failure, or a reform. Often people pay more attention to the failures than the reforms.”
He says this move by China will probably delay the US Federal Reserve hiking rates in September.
Looking to milk prices, the futures markets are pricing in some optimism at the GDT this week.
Futures trading has surged off its lows, ASB Bank’s commodities report says, with the November contract some 30% above the comparable auction price.
Mr Slabbert says the market has not yet priced this in.
To build your own NBR Radio playlist and enjoy instant on-demand access to any audio, sign up for our FREE smartphone-only subscription to NBR ONLINE.